South Africa’s foreign policy myopic

The SA Reserve Bank raised warning bells last week regarding the threat of secondary or indirect sanctions which could be imposed as a result of SA’s recent foreign policy decisions.

A sudden halt to capital inflows and increased outflows could threaten the stability of our financial system if our ability to make international payments in dollars becomes impeded as a result.

This announcement followed the recent delivery of National Treasury’s budget vote for 2023-24, which also drew attention to a number of factors affecting the continued – and sustainable – growth of the economy.

Minister Enoch Godongwana touched on inflation, the persistence and severity of load shedding, as well as the downside to our fiscal outlook, yet ignored a number of critical factors which require urgent attention.

Of particular concern, and closely related to Sarb’s outlook, is SA’s greylisting with the Financial Action Task Force.

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R265 million

While Godongwana has allocated over R265 million in additional funding to the Financial Intelligence Centre, this will do little to address the continued reputational and economic impact of myopic foreign policy decisions.

Claiming victory over the fact that we’ve frozen assets of entities linked to Isis, the Taliban and al-Qaeda does not inspire much confidence – especially when we continue to cosy up to other violent regimes.

Bear in mind that we have already fallen out of favour with many offshore investors, with foreigners currently holding 25% of local government bonds, down from as much as 42% in 2018.

The rand also hit a record low last week, after weakening as far as R19.86 to the dollar. Shortly afterwards, Sarb issued another statement, detailing its plans to prepare for a national grid collapse.

If we want to continue growing the economy, with increasing levels of foreign direct investment, capital and revenue, while maintaining the value of our already resilient financial infrastructure, we simply must prioritise plans to end our energy crisis, while taking a more disciplined approach on issues affecting our country’s reputation in the global arena.

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-Andhee is quantitative investment analyst at Ion Capital